Committee Report on 2018 Division of Revenue Bill

14 March 2018

Chairperson: Ms Y Phosa (ANC)

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Meeting Summary

The Standing Committee on Appropriations considered and adopted its Committee Report on 2018 Division of Revenue Bill. The Committee Report stated that the Committee received a briefing on the Bill from the National Treasury and also had engagements with the Financial and Fiscal Commission (FFC) and the South African Local Government Association (SALGA). The findings and recommendations were fine tuned.

Meeting report

Committee Report on 2018 Division of Revenue Bill
The Chairperson said in the 13 March meeting the Committee requested that staff look at the recommendations made by Standing Committee of Finance – recommendations that had to do with their work as a Committee. If there are recommendations that can be included in the draft Report the support staff can indicate those to the Committee.

Mr Tshepo Masoeu, Content Adviser, said that they had scrutinized the recommendations and raised particularly higher education. This will not be included in the DORA but the Appropriations Report. They also raise shifting expenditure away from consumption to capital expenditure and they have incorporated that in the Report.

The Chairperson invited the Committee to go through the Report page by page.

The Chairperson said there should be clarity on the budget shifting from consumption.

The Content Adviser said the Committee is noting in the budget that resources are allocated towards consumption rather than capital expenditure. Therefore, in the findings the Committee will make a recommendation on this.

The Chairperson said they should park this while they get actual information from the budget document on the Division of Revenue Bill, so that when they finalize they will be able to capture all the relevant facts.

The Chairperson asked if anyone had done any quality assurance on the numbers appearing on page 3, in the major revisions to the expenditure framework or whether National Treasury was satisfied with those figures reflected there.

Dumebi Ubogu, Director: Provincial Policy and Planning, National Treasury, said that they have done quality assurance and were happy with those numbers.

Mr A Shaik Emam (NFP) said he was concerned about continually using the word "poor" in their Report, instead of the word "underprivileged" which might give communities more dignity.

The Chairperson said what she knows is that South Africa is confronted by three challenges: unemployment, poverty and inequality. So, if they depart from that and say underprivileged it meant that they should start from underprivileged. But underprivileged does not give a clear definition of what they want to address as government in terms of poverty. Poverty is made up of poor people and they cannot just adopt underprivileged as a substitution for poor because they need to understand what they are dealing with.

Mr Lindokuhle Mlaba, Researcher: ANC Caucus, said that in the budget the word "poor" was used. In the Finance Committee debate last week the word "poor" was used. Now the Committee is dealing with the Division of Revenue. Unfortunately, it is too late to make an outcry about "poor" at this stage.

The Chairperson said although the concern of Mr Shaik Emam has good intentions, they could "underprivileged" when they debate it and use it interchangeably with "poor", but it will not carry the same impact. The word “poor” carries more in terms of the problem government wants to address and how it is going to address it.

Mr Shaik Emam said on the non-payment of municipal creditors on page 7 of the Report the Committee should include both municipal and provincial creditors because the Provincial Health Department in Gauteng took too long to pay its creditors.

Mr B Topham (DA) suggested that this should rather include all spheres of government.

The Chairperson said they should highlight the non-payment by all spheres of government.

Ms S Shope-Sithole (ANC) said they should name all those spheres of government to ensure that non-payment of creditors affects all government departments: national, provincial and local.

Mr Shaik Emam said they should say non-payment within the stipulated 30 days.

This was agreed to.

Ms D Senokoanyane (ANC) asked for clarity on page 12 where it stated: "In order to address funding gaps for waste management, implementation of environmental protection and its fees..."

The Content Adviser said this is a concern from SALGA in terms of funding gaps. This is what SALGA intended and they as a Committee would not want to change how this was presented by SALGA.

Mr Paulsen said in terms of this Report he is focusing on the language, not necessary on the content because his opinion of the Report will be expressed in the House.

The Chairperson said it should be remembered that the same rules that apply in the House apply in the Committee, whether its majority or not.

Mr Shaik Emam said he was not sure whether the man in the street will understand the clause in point 3.2: "The review of powers and functions across all three spheres of government (vertical review), should be undertaken at Budget Forum Technical Committee". The intention of this statement will not be understood by an ordinary person. Clarity is needed.

On the review of powers and functions, the Content Adviser replied that is how it was submitted, but if Mr Shaik Emam wants a simplified point that can be done in the Committee’s findings and recommendations.

Mr Shaik Emam said they can leave that point as it is, but in brackets insert a simplification of that point so that when somebody reads it they know what the Committee is talking about.

The Content Adviser agreed.

Mr Shaik Emam asked for clarity on the SAIPA recommendation that the Bill should specifically stipulate that section 84 of the Public Finance Management Act (PFMA) is applicable to transferring and receiving officers in breaches of the Bill.

The Content Adviser said this is what was submitted by SAIPA. Secondly, transferring and receiving officers is the official terminology used in the Bill. For example, the transferring officers will be the Department of Basic Education and the receiving officers will be the provincial departments of education.

The Chairperson said the Equal Education submission expressed concerns about the baseline reductions to Basic Education and the Provincial Equitable Share.

Mr Shaik Emam was concerned about the Equal Education submission which was not captured in the Report. One concern is the quintile system, which is something the Committee cannot ignore in its findings and recommendations.

The Content Adviser said Equal Education was of the view that basic education is in a state of crisis and made reference to the following issues: Early grade reading deficiencies, infrastructure backlogs, school safety, and scholar transport. The quintile system was not initially in the submission but the Committee could capture it in their findings and craft a recommendation which speaks to that.

Mr Shaik Emam said the lack of coordination between the relevant departments in the rollout of infrastructure must be highlighted in the Report.

The Chairperson said it should be emphasised in the Report that there needs to be collaboration between the relevant department in the rollout of infrastructure, for example, in the building of a new school.

Findings and Observations
The Chairperson said in addition to national departments and provincial departments, public entities are also required to reduce their spending on administration and adhere to compensation of employees budget ceilings as indicated in 4.2, page 15 of the Report.

The Chairperson read the last sentence of 4.3: "The Committee is concerned that the baseline reductions result in the composition of spending away from capital and towards consumption expenditure”. She asked for clarity.

The Content Adviser said the Budget Review stated the following: 47% or R59bn of the R85bn reduction consists of capital transfers. As far as possible these reductions have been applied to programmes that underspent in previous years. Nevertheless, reductions resulted in a shift in the composition of spending away from capital towards consumption expenditure. Hence they have noted as a Committee that this is a concern. In response, they have directed the executive which is the Minister of Finance to develop measures that will exactly address this problem, which is contained in their Report as well.

The Chairperson asked the representative from National Treasury to elaborate on this.

Ms Ubogu said she would not be able to speak for all of National Treasury, but they are talking of capital expenditure, such as the building of a road, building reticulation for water. But they can still have current expenditure that is towards some kind of investment. Therefore, the wording needs to change from investment to capital expenditure because the Budget Review says capital expenditure, but in the document it says investment.

Mr Paulsen said it will give them an opportunity to advocate for free higher education as social investment capital, the same as the SASSA grants which allow people to advance although they will not see the benefits in the short term. They need to encourage government to invest in free higher education.

The Content Adviser said they can insert in the same finding that the Committee is of the view that resources allocated to higher education are a social investment.

Mr Gcwabaza said part of their responsibility as a Committee is to analyse what is being said. There are two things they need to look into: where is the money being reallocated which is part of the reduction. Secondly, what is consumption and what is investment in government's point of view. Obviously, social grants are consumption. But free higher education, funding of scholar transport, funding of the school feeding scheme – that is investment in the development of human capital. So, they should clarify in their minds what it is they see in the budget, not just look at what National Treasury is writing. Otherwise they will keep on believing that most money is spent on consumption and less is spent on investment.

Mr Mlaba suggested that point 4.14 should be merged with 4.10 because the two points are related to each other. The Committee should raise the borrowing by local municipalities from credit markets.

Mr Topham said they should create another paragraph after 4.10 because Mr Mlaba is correct. They should extend this borrowing not only by municipalities but also to provincial and national departments because they also borrow from credit markets.

The Chairperson said the Committee notes the Financial and Fiscal Commission's submission that before budget cuts are done more rigorous analysis of performance of each grant should be undertaken.

Recommendations
Ms Ubogu said on 5.4 the recommendation is that the Minister in the Presidency for Planning, Monitoring and Evaluation should ensure that the Department of Planning, Monitoring and Evaluation coordinate the responses of line departments to recommendations made by the FFC and ensure that these are included in Government's planning cycle.

Mr Topham suggested that the Committee must have a common recommendation to the Department of Transport to move on the policy on scholar transport.

Ms Ubogu said the Department of Basic Education must lead and National Treasury provide the necessary supporting role.